Pinterest Pins Revenue Plans on Ad Targeting

The digital pin-board of choice for more than 70 million users made two significant steps on the advertising front in as many weeks. With an expanded test of ad products and targeting now underway, you can expect to see more ads as the company aims at online marketers.

Pinterest lays claim to a trio of unique traits that no other social platform can. The visual storytelling, mobile-forward platform embraced largely by women is elevating those strengths as it goes through the natural progressions that every social company encounters once it reaches scale.

Pinterest has made tremendous strides in growth, usage and versatility as it reshapes its platform for the next phase. And because its usage skews more heavily toward women than any other social platform -- about four out of every five users are female -- Pinterest has the attention of one of the most coveted demographics in all of marketing.

At least one-third of all women in the U.S. were using the platform by the end of 2013, according to Pew Research. U.S. males are slowly warming to Pinterest, but usage is still in the single digits having jumped from 5 percent to 8 percent last year.

If the company decides to go public, as it's increasingly expected to do, investors will cling to those numbers knowing that advertisers won't hesitate to invest in the pursuit of those users whom some refer to as the chief household officer.

That decision-making power combined with rapid growth in 2013 helps explain why Pinterest enjoys a current valuation of $3.8 billion and has secured $564 million in funding from venture capitalists to date.

First Come the Users, Then Comes the Revenue

But Pinterest must hit its publicly stated goal to generate revenue this year before any IPO plans come to fruition. And so, without fail, the inevitable shift to advertising is now well underway.

It's too early to tell how quickly Pinterest will be able to concoct the right cocktail for ads on its platform, but over the past couple weeks it has expanded tests on both sides of the equation -- ad products and targeting.

Pinterest's paid product it calls "Promoted Pins" is now being used by brands like ABC Family, Expedia, Kraft and Target in the search and category feeds. Ads like these could generate up to $500 million for Pinterest in 2016, according to some analyst estimates.

The company is also making some of its data available to a select group of ad tech firms to help businesses gain insights beyond those provided by Pinterest. By providing these companies automated access to its API, Pinterest is encouraging developers to add more important features like conversion tracking.

Opening the Spigot on User Behavior

"Many businesses use Pinterest to learn about their customers. You might want to learn which of your products are popular, what types of images work best or which pins are driving the most engagement and sales& Insights help businesses engage better with pinners. This could be which boards and pins are getting the most engagement, which downstream actions pins are driving or what products are most popular with pinners," the company says in a statement.

"We're really bullish on Pinterest as a channel," says James Gross, co-founder of the content marketing platform Percolate, one of seven companies provided early access to data on more than 750 million boards with more than 30 billion pins.

"Brands are getting much more used to using social platforms to tell their visual story. So I'm seeing a lot of brands actually starting to use Pinterest as a brand channel as much as an ecommerce channel. I think it always made a ton of sense for ecommerce but given its size and its scale and the engagement they can show on mobile it's got a good argument for really being a great, strong brand marketing channel," Gross says.

Big Brands Are Eager to Pin

Gross calls Pinterest a "wonderful awareness channel" with a user base that heavily influences household purchase decisions. Given the demographics and visual nature of the platform, Percolate has seen a lot of demand from its large consumer-packaged goods clients like Anheuser-Busch InBev, Unilver and General Mills, he adds.

"Brands love to tell stories visually, TV taught us this. Making that leap to Pinterest is a lot easier than having to make the leap to something else," says Gross. "The key is how do make this data available and how do you map it back to the original intent of the brand."

The co-founder and CEO of Curalate, another ad tech firm with early access to Pinterest's data, says there's been a societal shift toward more visual communication. "I think there's something much more emotional about an image," says Apu Gupta, pointing to more "long-term anthropological underpinnings that we don't fully understand."

Twitter, Facebook, Tumblr and others have all been pulled into this strong undercurrent toward a much more visual and inherent form of communication. "This isn't about Pinterest, it's about pictures ... and it's been happening across the Web since it first started," Gupta says.

"Every social media analytics tool that's ever been invented, the Web itself was invented based on the assumption that there will be text," he says. Curalate helps brands overcome that problem by scanning at least 200 million images a day and fingerprinting them so companies can keep tabs on their visual content once it leaves their domain.

Not a Zero-Sum Game

Pinterest is also addressing this through a new feature called "Guided Search," which groups related pins into descriptive guides to help users sift through the content more easily and effectively.

As Pinterest continues down the path to revenue, it will probably encounter some of the same growing pains that Facebook, LinkedIn and Twitter all faced at one point or another. But Percolate's Gross says it's important to remember that social media is not a zero-sum game.

"I think they're all going to win as they all continue to build better and better ad targeting mechanisms. That's the real promise," Gross says. "The fact of the matter is the targeting and the time and attention is just better than the options that marketers had before. So as long as that continues to be the case ideally all of these platforms will continue to get spend because it's more efficient than something else they're doing, and that merits investment."

CIO.com Senior Writer Matt Kapko specializes in the convergence of social media, mobility, digital marketing and technology. He enjoys traveling and hitting the road with his wife, going to shows, rooting for the 49ers, gardening and reading.